Stocks Bounce, Jobless Claims Remain Elevated, Wall Street Braces For More Panicky Selling

After three straight days of losses, investors dusted themselves off and bought the dip on Wednesday, an intrepid strategy that worked wonders during the heydays of QE, but may prove harmful to a portfolio in the second leg of a bear market, which is precisely what is unfolding currently.

While stocks made a nice move on Wednesday, the major indices failed to cover the losses from even the prior session and they slumped noticeably into the close, giving up between a quarter and a third of the day's winnings.

With Thursday's opening bell a little less than an hour away, futures are pointing to a mixed to slightly lower open, just the kind of turbulence that is to be expected, especially with initial jobless claims coming in at 884,000, a carbon copy of the prior week's release.

In terms of signal to noise, selling seems to be the dominant signal, pumped action higher mostly leftover noise from the easy money short squeeze and Fed push of the past five months. Stocks are still at nosebleed levels and any punches that land are going to unleash a a torrent of blood flow. As stated in Wednesday's post, earnings season will more than likely deliver bad news. Even though expectations for most companies will have been guided lower, year over year comparisons will clearly show that growth has stalled out for many companies.

The political, social and economic climates continue to be challenging to say the least, leading to uncertainty in markets, a condition unwelcome on Wall Street. Big money will be rotating out of vulnerable positions, though finding safe havens in individual stocks may become a fool's errand as the recession proceeds and market sentiment sours.

Running to corporate bonds can only provide temporary relief and with yields at embarrassingly-low levels fund managers should find little relief there. The options available are almost certain to run somewhere between bad and horrible.

As the declining scenario unfolds - with days of gains shadowed by continued losing sessions - the winners will be those seeking not to advance their capital, but to preserve what's left of it. The recovery and expansion of the economy touted by mostly perma-bulls or spokespeople for the White House will turn out to be more in a series of false promises. This is not to say that President Trump will be significantly challenged in the election. He will win in a landslide despite the media's best effort to cloud the minds of voters with scenes of COVID-19 horrors, street protests, vandalism, looting, and rioting. His handlers have to talk up the economy. It's all they know and actually speaking the truth about a painful economic experience is strictly off limits in the charged political environment.

All of this uncertainty will eventually lead to one profound tactic. Buying gold and silver as a hedge and wealth preserver will prove to be not only prudent but probably highly profitable. The US dollar is losing strength and the Fed's opaque message of inflation can lead to nothing good, unless higher prices for everything useful or necessary somehow becomes a desirable outcome.

The message to goldbugs and silver stackers has never been clearer. With prices depressed from the month ago highs, precious metals are at bargain levels. The one caveat is that in the case of a stock market crash, the metals will also take a hit, though not as badly as one might expect. Nobody in their right frame of mind is going to sell gold at under $1900, nor silver under $24 an ounce. Those are pretty well established support levels and all indications are that they will trend higher as the economy of not just the United States, but that of every country on the planet is taken down to brass tacks and spare parts.

Markets and economies all go through phases and periods of boom and bust. As the fiat currencies - dollar, euro, yen - burn to ashes, gold and silver, the undeniable real hard money assets, will prosper.

At the Close, Wednesday, September 9, 2020:
Dow: 27,940.47, +439.58 (+1.60%)
NASDAQ: 11,141.56, +293.87 (+2.71%)
S&P 500: 3,398.96, +67.12 (+2.01%)
NYSE: 12,885.80, +197.73 (+1.56%)